Upstart Stock Sinks on Downgrade, Price-Target Cut

The equity has already shed more than 16% in 2022

Digital Content Manager
Mar 22, 2022 at 10:12 AM
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Upstart Holdings Inc (NASDAQ:UPST) is sinking today, last seen down 9.3% to trade at $114.20. What's hurting the security is a downgrade from Wedbush to "underperform" from "neutral," which accompanied a hefty price-target cut to $75 from $110. The analyst in coverage noted weakening delinquency trends that could hurt the cloud-based lending firm, in addition to macroeconomic and geopolitical risks, and a reliance on third-party funding.

Wedbush is breaking off from a mostly bullish brokerage bunch. Coming into today, five of eight analysts in question carried a "strong buy" rating. What's more, the equity's 12-month consensus target price of $210.30 is a whopping 83.8% premium to its current perch.

Meanwhile, short sellers have been piling on Upstart stock. Short interest is up 24.6% in the last two reporting periods, and the 10.23 million shares sold short make up 14.1% of the security's available float.

The options pits also lean bearish, given UPST's Schaeffer's put/call open interest ratio (SOIR) of 1.14 sits higher than 71% of annual readings. This means short-term options traders have rarely been more put-biased. 

A look at today's trading shows 18,000 calls and 11,000 puts exchanged so far -- double what's typically seen at this point. Most popular is the weekly 4/8 150-strike call, followed by the weekly 3/25 110-strike put, with positions being bought to open at both.

It's also worth noting the stock's Schaeffer's Volatility Scorecard (SVS) sits at 99 out of 100, meaning the equity has exceeded option traders' volatility expectations over the past year.

Upstart stock is nowhere near its Oct. 15, all-time high of $401.48. In fact, the shares are still attempting to recover from a Jan. 24, record low of $75.15. Overhead pressure at the 80-day moving average came into place in mid-November, after the security saw various bear gaps, and the trendline has already rejected two rally attempts this month. Year-to-date, UPST is down 23.1%.


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